JayWeintraub.com - Internet Advertising Analysis and Growth Insights

The Richest People I Know No Longer Have Blackberries.

Almost one year ago, I wrote a post  "The Richest People I Know (Still) Have Blackberries - And They Aren't Looking to Change." As I do with some of my less Inside Baseball posts, I shared it on Facebook. The conversations were great. Almost everyone over 30 has owned a Blackberry and has gone from Blackberry to some other mobile phone / operating system. One half are thrilled that a better alternative came along. The other half are still pissed that Blackberry screwed up so badly. 

Last year, there was a small but powerful minority who still used their Blackberry, and if you looked at median wealth of these users, it would be been astounding. As I wrote then, "Some of the Blackberry users I know aren't people who don't "get" smartphones or can't appreciate the app ecosystem. In fact it's the opposite. They understand the value almost scientifically. And, they have determined that their productivity remains far increased with Blackberry devices. Moving to another device will cost them money, and when your net effective earnings exceeds $10,000/hr, 30 min gains in efficiency are meaningful."

Today, that small but powerful minority is a dying breed, as I circled back with a few of them to see what phones they were using, and it wasn't a Blackberry.  Unfortunately, Blackberry has only Blackberry to blame. While my advice was worth about that of anyone from the cheap seats and undifferentiated, I thought Blackberry will succeed not by competing with Apple but by being the anti-Apple. They should copy Apple, though, by leveraging their "fan boys." Apple may be cool, but Blackberry could again become an aspirational brand. I know I wouldn't mind having a piece of whatever has made that small but powerful group successful, and it's much easier to ascribe that success to something tangible, like a phone, something we can all have.

Alas, Blackblerry did the exact opposite. Their most winning products were the 8000 and 9000 series. Next up after a product from 2008 was the 10 series. But, instead of improving the lives of their small but disproportionately powerful fan base, they did the opposite. The first 10 series phone was, you guessed it, a touch-screen one - The Blackberry 10 Z10.  The Blackberry operating system, while nicely ingrained for many enterprises, is not a good enough hook to challenge people to use a subpar touchscreen phone. And frankly, any first or second generation touchscreen that wasn't Apple's iOS sucks. Why would you want to alienate your core further by giving them something that in no way can be competitive? 

Months later, Blackberry (finally) released the Blackberry 10 Q10, a new keyboard phone with their revised operating system. But, as one keyboard user says, it's as though the entire phone was an after thought. The issues he has fall right into "Treat versus Chore." It's a framework and scale for evaluating the mental tax of using a product, and when you have more chores than treats, you build up a tide of negative sentiment that isn't noticeable on the surface but can lead to mass exodus' later. The last thing Blackberry needed was to screw up their keyboard phone, and that's just what they did. The very reason why this group used the phone was not just the keyboard, it was the efficiency as a result of the keyboard. Screw up the efficiency and no keyboard is going to save you. 

In this case, Blackberry took away the much-loved shortcut buttons from the phone. There's an added chore. The extreme customization, also gone. I listened to one person who got his new Blackberry as part of his new job. Never has used the phone with any other email account. Yet, when he types his name, his old email address from his past phone shows up. No way way to clear the cache or history with name. Then there was the phone itself. If you missed a call, it showed the contact and which number, but the missed call was from a line item level not a contact level. So if you wanted to call that person back on a different line, you had to exit the phone, go to contacts, find that person and call. That wasn't the case before. And, the list went on. At some point, which was now, enterprise security was not enough to force people for whom time is their most valuable commodity to waste more of it. 

Blackberry, you will be missed. 

Microsoft's Surface Lack of Success Explained in One Word… Kids

During the CBS Blackout, I was out at a local restaurant watching one of the US Open matches. In a rare moment when a commercial from Mercedes Benz or IBM was not playing, one of Microsoft's Surface commercial was. It was the one (embedded below) where a Siri like voice laments the lack of features of the iPad when seeing what the Surface can do. 



The person next to me said, "I like this commercial." I have to admit. I agree. It's clever. Apparently, it's not clever enough as Microsoft just announced a trade-in program, worth a MINIMUM of $200 for their iPad 2, 3, or 4, so long as it is only "gently" used. The program runs through October 27, in time for the company to celebrate the one year anniversary of its first-ever branded piece of hardware (this assuming the Zune doesn't count). 

Most analysts seem pretty skeptical about the program, at least in terms of its ability to truly spur sales of the Surface and/or slow sales of the Apple iOS and Google Android tablets. And, they are right I suspect for reasons that are pretty similar to why certain low end cell phones won't unseat the iPhone. One is a price decision, the other aspirational (or at least emotional). If you want an iPhone for instance but can't afford one, you will pick the next best alternative, but the company behind the next best alternative isn't gaining an iPhone customer. They are getting someone who will sometime be an iPhone customer or if trading in something-in, someone who wasn't going to buy the premium product anyway.

Trade-in economics aside, the bigger issue remains Microsoft's missing out on the mobile revolution and so far missing out on the tablet revolution. Few would have predicted that tablets would have destroyed the netbook but more importantly transformed personal computing purchases. I certainly wouldn't have, which as an admitted late bloomer, late adopter, doesn't surprise me. But, I wasn't fully surprised by the iPad success as much as some. And all it took was a few trips to the airport to understand why. What has surprised me though is generally speaking how little I feel I have heard about what I say is the real reason for the iPad's success. Kids. 

For me, it's interesting to think of how we got here. Not surprisingly, I believe Amazon's Kindle paved the way. It was a logical step for many early adopters and non-early adopters a like. We already had been trained on digital music, so books, especially from the "world's largest bookseller" made sense. The Kindle came out in November 2007, almost three years before the first iPad. By 2010 and the launch of the iPad, I think many were willing to give it a try even without knowing what it could do. The combination of it being an Apple product, Apple being on a brand high with the iPhone and App Store successes, meant that even if it was just to browse the web with our fingers or read books, that was enough. The accidental discovery which changed everything for the iPad and the tablet market, though, was kids. 

Adults don't own more than one laptop, even affluent people. They do own more than one iPad, especially if they have kids. Parents didn't know they would buy more than one iPad when they did. But through the law of unanticipated consequences, parents all over saw how their kids, even those as young as two and three, glommed onto the device. They made their parents smile at their ability to use it, and then once they dinged it and dirtied it, parents realized they weren't getting theirs back. Then a whole new generation of parental iPad owners started to emerge, not just the early adopters with kids. A whole group who thought about buying the portable DVD player but didn't, those who already had portable DVD players but realized the value increase with the iPad, and those with iPhones and app enabled iPods with kids using it who decided the bigger screen was ultimately better.

And, as several parents have shared, once you have kids, not only do you no longer have your own iPad. Even with one kid, you will buy more than one iPad. Why? Kids break things, especially delicate screened devices. Even those who financially or morally wouldn't have bought iPads gave in. The price of calm and quiet will make you do some strange things. As a new dad, I'm getting very familiar with that concept.  I say I want my kids to not be hooked on TV. I say I have all of these ideals on how I want to raise them. I can tell you now that the moment they scream that extra bit or want to climb all over the place if on a trip, I will not hesitate for a second to whip out an iPad and lull them into a pixelated stupor.   

Whether intentional or not, Apple cashed in another way too. They don't allow user profiles. So, if you want to make sure your files and apps are safe from your kids, the only way to do so is by biting the bullet and getting another device. Recent Kindle Fires have this, and it will certainly appeal to parents who are tired of buying multiple devices. At the moment, though, it's once again the app ecosystem keeping parents and their kids loyal. And so long as parents keep buying, kids keep spending, developers will keep developing for this self-selected, discretionary income crowd.

As for Microsoft, they should have purchased Blackberry not Nokia. And, their first tablet shouldn't have focused on Office but the Xbox. Many of the iPad wielding parents were and some might still be console-goers. The Xbox brand would have given them some belief, be it real or nostalgia, that a Microsoft tablet would be good for them, i.e., their kids.  

Open Table and Foursquare - A Date Cake Explains the Former's Value and the Latter's Challenges

Last night I was eating dinner with my wife (sans twins) at a local restaurant which has a fantastic patio, a huge draw for city dwellers like myself who have no outside space of their own. There was a period about this same time last year where I became the mayor of this restaurant on Foursquare. When asked to do a lunch meeting, I would default to this place for its 200 sq. ft. of fresh air and ability to hear the other person.

Technically, I've been trying out Foursquare for at least two years. I remember when I joined. I was at a birthday party When I joined, I was invited to have drinks with one of NYC's best connectors, turned entrepreneur (Brewster), and all around great guy, Steve Greenwood. I cannot claim to be a close friend, but Steve has the ability to make everyone feel welcome and close. Also there were some people from Foursquare. At the time, the company was arguably the hottest tech startup in NYC and one of the hottest globally, up there with Twitter and Facebook.

That it took me several years to join doesn't say anything about Foursquare. The only new technologies of which I have been an early adopter are usually by accident. I don't seek out the new. I wait until critical mass, then analyze and synthesize. That's what I've been doing for the past two years on an ad hoc basis with Foursquare. As a user, the app hasn't done much for me, but as a mobile innovator, helping to usher in the API era, the first local / social play at scale, and a pioneer in game dynamics, Foursquare was something that I felt I need to use given its significance.

So often with some technologies I find myself feeling like Tom Hanks in Big, because I find myself saying, "I don't get it." I appreciated so much of what Foursquare accomplished, but as a user I found myself only using it because as a customer acquisition guy and media commentator, I felt I needed to. Others in my network had made Foursquare a habit too, so the friction I experienced I chalked up to my late adopter status as opposed to anything to do with Foursquare.

As an LTV and monetization minded person I did find myself questioning the various revenue strategies. I haven't written much about Foursquare. Most recently, I wrote a brief post about their monetization in June of 2012. The only other piece was two years prior, in 2010, when I wrote about two Old Navy campaigns, one on Foursquare, the other on this still new business called Groupon. Looking at the 2010 example first, it is clear that when it comes to driving sales, Groupon and its approach would dominate.

Push vs. Pull
This is the ultimate marketing dilemma, and the reason why flash sale companies can drive scale but Google is king. The two work hand in hand. Most advertisers will never spend as much on Google as they can on other push channels. For so many things, users just aren't in market and searching. Cell phones are a perfect example. There are rare times like this where a meaningful new phone comes out and people want it. They are looking, searching, they are pulling. For almost every other phone and for periods in between major releases, companies hit us over the head with marketing, coming up with new incentives that they hope can spur us in to action.

Those in the customer acquisition space often get knocked for needing to spend money to make money, but the fact of the matter is that's how life works. Scale for the vast majority of businesses means having to push messaging to users. Our biggest purchases from real estate, banking, automotive, internet, mobile phones, mobile plans, travel, apparel, electronics, and insurance - all our push marketers. Even Apple when it was the most valuable company in the world spent more on push marketing by a wide margin than it did on pull marketing.

Google is so valuable because all businesses need an online presence, and at the moment, Google is the gate keeper for all intent based traffic. Their ability to offer easy advertising to any business combined with every business needing to use Google makes them more valuable than any push channel provider. The push landscape is also more fragmented, generally more expensive to set up at scale, e.g., TV, and works for a much more narrow band of companies. So not surprisingly, we see valuable push channels, e.g., Groupon, but none that will rival Google.

Back to the Date Cake
Last night, we ordered a dessert that has been bad for our waistline but good for the restaurant. Along with the outside seating, it has been a highlight of our visit. Lucky for us that the weather last night was so great, because the date cake was not. Being ones who likes to comment, hopefully constructively, we asked if the recipe had changed. Far better in our experience to ask a question as opposed to just complain. Turns out the recipe had not but the pastry chef had. The waiter had us speak to the manager because when waiters complain he said it can fall on deaf ears.

After similarly recounting our love for the date cake in its previous execution to the manager, the waiter returned to chat further. While we were regulars and a had a history on Foursquare to show for it, the restaurant didn't know that. He asked if we used Open Table. I said yes for certain things, but for places where I know their usage and can get a seat without a reservation I don't like charging the restaurant for me to show up. Thoughtful of me to save them $4+ but as this was not a sole proprietor shop, the incremental savings was not as top of mind to them as it was to me.

I may not be an early adopter, but as one who has done events in and around the local + tech space, when a restaurant talks, I want to listen, especially when what they were saying went counter to my understanding.

This restaurant really likes Open Table, but they don't really care about the actual reservation function that much. It's the software's role as an business operating system they like. As an operating system they use it in two main ways, on the individual diner level and in aggregate. They said that it would be great had I used it because they would have known my frequency and my preferences - from food to habits, e.g., comes at lunch often, likes the date cake, is a fair weather patron, etc. Some of that Open Table provides, other info they infer from the data. In aggregate, Open Table helps them gain a snap shot of the business performance and explain anomalies, e.g., holiday weekend, sporting event, as well as trends, e.g., weather-based performance. Open Table is far from big data, but it has good data that makes sense to the restaurant. And, in this case, the data about the patron is worth what is in reality a customer acquisition based fee (the per-reservation fee).

Even less expected was this one person's feeling about those who use Open Table versus others. He is more likely to listen to reviews on Open Table and take comments from diners more seriously. He compared it to Yelp, where they find Yelp more like a business tax, something they must do because of its data reach. The comments have less utility and on the whole sit on the extremes. As for Foursquare, the average employee doesn't have a way to gauge the business performance or gain insights about the diners the way Open Table does.

What Foursquare Has to Overcome
Foursquare still has some of the most amazing local data that has become the backbone for so many other applications. User activity is at the core of that data, so contined engagement is essential. Not being privy to complexities that is operating Foursquare, offering specific advice would be naive. What I want to share instead are thoughts on a more macro level based on my personal experience and the limited feedback.

• Lack of Scale As a Media Play - Foursquare's focus on the consumer makes it by nature of a consumer play. It's not software, so users don't pay for it. Nor is it consumable/perishable/tangible (like food or electronics) so again, the model is free distribution versus paid. That means someone has to pay for them to make money. If it isn't consumers, it must be businesses. What do businesses pay for? By and large, they will overpay for customer acquisition related activities versus other pieces like loyalty.
  
  The check-in nature of Foursquare has made it historically more pull versus push. We saw this in 2010, and for the most part, it remains true today. For pull to work, you need scale. Massive scale and/or vertical focus so that you can have deep penetration in specific areas.
  
  Foursquare has tens of millions of users, but based on the number of people I see checked-in as a percentage of the diners, their penetration is rather low. Were I to walk around and ask people how many are members of Groupon or LivingSocial, I bet the number would certainly be equal but in all likelihood greater. And as a true push platform, and one based on deals, its ability (setting aside value) to affect business will be much greater. So, as a media play where businesses pay to reach consumers, that probably will not be the winning strategy. We have seen them testing their data in other media scenarios, as targeting data for non-Foursquare venues. It's an interesting idea, but it's hard to imagine that it can become a sustainable source of a revenue , i.e., make them profitable. As a data play for other companies to target local ads, they are getting only a fraction of someone else's ad budgets. That is why it can make money but can't be the only source.
• Not A True Platform - Were I a VC, I would have absolutely bet on Foursquare for so many reasons listed initially. Ultimately, we might say that Foursquare was too early, because only now are we able to compare it to other mobile first apps and see a potential flaw. We look no further than Uber. It's the Nextel of the future. A mobile to mobile business solution which instead of being business to business it showcases the true potential as a business to consumer asset utilization and yield management platform.
  
  Uber aggregates supply and demand, but it is also a closed loop business solution. More importantly, it is the transaction engine as well. Open Table has some of these features, but Foursquare has none of them. It is a uni-directional app. Users can have it. Businesses can have it, but both don't need to have it for it to work. This is essential for Twitter and other platforms, and it was essential in Foursquare's growth. It is also a key component of the data they have. As a business though, it now presents a challenge. Merchants use Twitter. They use Facebook. Not all use Foursquare. Unlike the Facebook and Twitter, Foursquare didn't develop into a communication platform. It doesn't have an audience management component, which among other things has become one of the lures of FB and Twitter for business owners. Equally important, FB and Twitter have a business model that gets local dollars but isn't reliant on them.
  
  Outside of ad driven uni-directional apps, games are the other type to make money, and unlike ad supported apps, the best games make money from consumers. Foursquare pioneered game dynamics for engagement, but it isn't currently set up to make money from consumers using its game dynamics.

Business Solution, i.e., It Isn't Yet
Looking at Foursquare in the context of a media property and a platform play, I believe helps us understand where its opportunities may lie and why it may not have taken off as once appeared likely. Foursquare won't get money from users, so it must get them from other businesses. From whom and where is the $600mm question. One of the biggest allocation and easiest dollars are customer acquisition, which are usually advertising related or transaction related. Google, Groupon, Uber, Yext, and Open Table make money from local businesses in this manner.

Another way to make money locally is being a operations solution, areas owned by Open Table and NCR with emerging competition from Groupon, PayPal, and others in the payments space. When you touch money, you are a necessary expense, so it's no surprise that the biggest players all touch money in some way. You can get paid per transaction or on a SaaS model like Open Table. Payments are not an easy nut to crack, so as a business solution, Foursquare will probably need to be a SaaS play. Whether that is on the marketing / advertising front of more operationally, neither of these are an easy nut to crack.

Press Your Winners
There is a saying I like a friend told me around pressing your winners. There is a reason that Google focuses so much effort on cost per click advertising via its AdWords product, as opposed to focusing too much effort to change the format. That's its winner. It works. They will do far better to keep making it as good as possible - initially via relevancy and latter through squeezing businesses because they can. That's pressing your winners. Foursquare will need to find its winner and optimize the crap out of it as a way to become essential for businesses to spend money with the platform. If they don't, they need to optimize the crap out of the user and make the user pay. Groupon essentially does both. What they can't afford to do is get distracted by ideas that only work for closed loop systems like Uber or push platforms.

Who knows, perhaps the wearable revolution will somehow benefit Foursquare, allowing them to become a data play like Nielsen for businesses large and small. I'm not ready to write them off the way you could have written off Webvan or other businesses whose model couldn't possibly work given the existing infrastructure.

Under the hood, I suspect there are many challenges at Foursquare, but the biggest by far is not just business focus but culture focus. It's been mentioned elsewhere, but being the top dog to running towards the back of the pack is really hard. It's really, really, really, hard but not impossible. IBM did it. Microsoft to some degree has done it (business solution revenue). And in the eyes of Wall Street, AOL has done it. Regardless of one's opinions, working at AOL today is probably 100x better than working there three years ago. Moving to the back of the pack is a blow to ego, but it leaves you alone to focus. Having been through the dotcom bubble, I have seen how a company can execute its way to success. The Ferber brothers were masters of that at Advertising.com, but more than anything they were masters at culture. I hope the team at Foursquare can master that first, so that they can surprise us all.